Systematic Investment Plan (SIP)

    pie
	    title SIP Contributions Over Time
	    "Investment Amount Over Time": 40
	    "Market Impact": 20
	    "Cost Averaging Effect": 20
	    "Returns": 20

## What is the primary purpose of a Systematic Investment Plan (SIP)? - [ ] To invest a lump sum of money all at once - [x] To invest regularly a fixed amount of money over time - [ ] To buy high and sell low for quick profits - [ ] To switch investments based on daily stock movements > **Explanation:** SIPs are designed for long-term investing through regular contributions, ensuring disciplined wealth-building. ## How does dollar-cost averaging in SIP work? - [ ] You always buy the same number of units - [ ] You buy more when prices are high - [x] You buy more units when prices are low and fewer when prices are high - [ ] You panic sell during market dips > **Explanation:** The essence of dollar-cost averaging is to reduce your average cost per share by buying more when prices go down. ## Can you start a SIP with $50? - [ ] Only $1,000 - [x] Yes, depending on the mutual fund's minimum requirement - [ ] No, because $50 won’t make a difference - [ ] Only for 1 month > **Explanation:** Many mutual funds allow SIPs to start with as little as $50, encouraging everyone to begin their investment journey! ## What is a critical benefit of SIPs compared to one-time investments? - [x] Reduced investment risk through market fluctuations - [ ] Higher profits on day one - [ ] Automatic withdrawal fees - [ ] Less paperwork > **Explanation:** SIPs help reduce market risk through consistent investing over time, making them less vulnerable to market volatility. ## What's likely to happen if you stop your SIP payments? - [ ] You'll be charged a fee - [ ] Your investment automatically converts to a high-risk fund - [x] Your investment stops growing, and you're taking the money out - [ ] The fund company will come to your house > **Explanation:** Stopping SIPs halts additional contributions, which can affect your long-term wealth-building goals. ## How can SIPs help in financial planning? - [x] They provide a disciplined approach to saving - [ ] They guarantee huge returns - [ ] They’re only useful in bull markets - [ ] They eliminate all risks > **Explanation:** SIPs promote discipline in investing, which is critical to achieving financial goals over time. ## What is the typical term used for the average cost per share when investing through SIPs? - [x] Average pricing - [ ] Market capital - [ ] Lump sum pricing - [ ] High-low trading average > **Explanation:** The average cost per share is often described as your overall price paid per unit, allowing investors to track their investment performance effectively. ## When can you review the performance of your SIP? - [x] Regularly, often annually - [ ] Only when there's a major economic crisis - [ ] Only at the end of 10 years - [ ] Review is not needed > **Explanation:** Investors can and should regularly review their SIP performance to ensure it aligns with their financial goals. ## What type of psychology does SIP investing promote among investors? - [ ] Panic-driven buy and sell - [x] Disciplined savings and investment patience - [ ] Hasty decisions - [ ] Uneducated guesses > **Explanation:** SIPs encourage disciplined and patient investing rather than quick, panic-driven decisions, making them a healthy choice for long-term financial wellness. ## In a nutshell, why should one consider a SIP? - [ ] It guarantees instant wealth - [x] It nurtures steady growth and builds wealth over time - [ ] It's a shortcut to financial freedom - [ ] It avoids all forms of financial risk > **Explanation:** SIPs are about developing consistent saving habits to gradually build wealth rather than chasing quick returns.